An Oscar for Mythology

July 8, 2003

David Sweeny is a legend in his own time. Blind, unflappable, and stupendously successful at 39, he’s guided the city’s only nonprofit industrial developer for a decade, snaring every award in sight while simultaneously turning himself into a multimillion-dollar condo entrepreneur. No one’s noticed, on his way to all this acclaim, how intertwined his nonprofit personal ventures have become, or the trail of broken promises he’s left in his wake.

Around this time last year, Sweeny was one of 17 recipients of the 2002 New York City Neighborhood Development Awards handed out by Mayor Bloomberg at Gracie Mansion. While others won awards of merit and distinction, Sweeny was the only one to walk away with the Outstanding Achievement Award. It was nothing new for the executive director of the Greenpoint Manufacturing and Design Center—home for 115 woodworking and other craft businesses at five sites in Brooklyn. Crain’s New York Business named him one of its “40 under 40 rising stars,” and he also won the Union Square Award, the $50,000 Oscar of community organizations.

Yet, less than two months before Bloomberg honored him, a jury in Supreme Court in Brooklyn awarded a furniture designer, who was a partner of GMDC, $2.2 million in damages, finding that it had “breached its obligations and fiduciary duty” to “unjustly enrich” itself in wholesale violation of a contract.

The designer, Jonas Milder, charged that Sweeny approached him and negotiated a deal to mass market an office furniture system Milder had created eight years earlier. But after Sweeny secured the design, the agreement, and the client lists, his lawyer wrote Milder insisting that a GMDC subsidiary had “every right to manufacture and sell the Standard Line without your involvement or interference in any way.” Milder contended that GMDC—which then hired another designer—was “marketing knockoffs” and filed suit in 2000, winning on every count listed in the four-page jury verdict form. To avoid a prolonged appeal, Milder settled with GMDC and signed a confidentiality agreement, barring him from discussing the final price GMDC paid.

A year earlier, Sweeny blew another $1.3 million in GMDC funding when he forfeited deposits on two properties GMDC had signed contracts to buy—one in Long Island City and the other in Williamsburg. While Sweeny has brushed aside months of Voice inquiries, he did grant one brief interview, explaining the extraordinary forfeitures with the simple line: “Business conditions changed.”

But it’s Sweeny’s handling of GMDC’s prime asset—a 400,000-square-foot waterfront rope factory at 1155 Manhattan Avenue in Greenpoint that houses more than 60 small businesses—that’s won him the most fame and is currently causing him the most trouble. Attorney General Eliot Spitzer has launched a probe, responding to a detailed complaint filed by the building’s tenant association, which charges that GMDC is draining a facility given it by the city to promote industrial development.

The complaint points to the wasting of GMDC assets, charging that the apparent “source of these deposits” was the bank financing GMDC obtained to renovate the factory building. In one instance, GMDC made the deposit a month after it got a $4.6 million loan against the Manhattan Avenue property. The tenants contend that improvements at the building—including fire safety requirements that were part of the 1993 agreement with the city—have instead only been partially made.

But attorney Dan Kurtz detailed a host of other charges, especially the banning of all tenant representatives from the GMDC board, the submarining of a co-oping plan, and the attempt to impose market rents in violation of GMDC’s tax-exempt status. Kurtz points to the shroud of secrecy that engulfs GMDC, which refused to disclose even Sweeny’s combined salary to tenants when they were on the board. Sweeny and GMDC’s longtime board chair, Leslie Winter, who once ran New York University’s Real Estate Institute, contemptuously dismissed Voice requests for routine information even though GMDC’s disclosure filings indicate that it’s received over $4.3 million in grants from city, state, and federal agencies, in addition to the gift of the city-owned building.

All Sweeny will say in response to these charges are bromides like “We put everything in Manhattan Avenue that we were supposed to.” Though GMDC’s tax-exempt status requires it to offer space “at cost,” Sweeny smirks when asked if his $12-per-square-foot rents are at or below market. “It’s a professional call,” he explains, conceding that rents are rising, forcing some tenants to contract and at least one to leave.

Kurtz’s final allegation is the most serious: “Sweeny may have violated his duty of loyalty to GMDC by appropriating corporate opportunities for himself through the use of GMDC resources.” A Voice investigation has uncovered six private real estate investments of Sweeny, some in Greenpoint and some involving other major GMDC associates.

GMDC’s principal outside counsel, Marcus Attorneys, has also represented virtually all of Sweeny’s personal ventures, which range from an office building just a block away from a GMDC facility to a recent $5 million condo project at 142 Prospect Park West in the heart of Park Slope. Jed Marcus, the head of the law firm, refused to explain how any independent party could evaluate whether he was fairly billing GMDC when he may have discussed corporate and personal business with Sweeny in the same conversations.

Libby Ryan, the treasurer of GMDC, was the broker on the Prospect Park condo, signing a certification letter for it on submissions to the AG. The same professional engineer from Carl Guinta Associates who made Buildings Department filings for this project was making them for a GMDC project only months apart. Another real estate company, Greiner-Maltz, worked for both, as did GMDC’s former accounting firm. While neither Winter nor Sweeny will get specific about the project, both acknowledge that Winter was an investor in one of Sweeny’s ventures. Winter stopped answering questions when asked by the Voice if it was appropriate for the chair of a nonprofit board to become a partner of his chief subordinate.

Ironically, Sweeny’s answer to this awkward web was “My counsel and C.P.A. have reviewed all GMDC activities, and my private developments, and have determined that there is no conflicts of interest.” Each wore both hats themselves.

The private ventures have also evoked lawsuits similar to Milder’s. Bernard Murray, who claimed he found, renovated, and managed a Greenpoint property that he brought to Sweeny, sued when Sweeny evicted him. That case was settled without going to trial—and the terms are confidential—but one judge found on a preliminary motion that “the allegations provide support for the claims of breach of contract.”

The other case is a commentary on Sweeny’s fundamental character. It was brought by North Brooklyn Development Corporation, the nonprofit that gave young Sweeny his start and introduced him to the rope factory 12 years ago. It paid his medical coverage as he lost his eyesight. Years later, at Sweeny’s suggestion, NBDC entered into a partnership with him to buy an old brush factory in Greenpoint, with NBDC coming up with the entire purchase price. Sweeny was charged with converting the building into an office complex, with NBDC sharing the space and the profits. Instead, Robert Peters, the former executive director of NBDC, says, “We went to him and his buddy Winter—who is also an investor sometimes on his deals—and said, ‘Look, we’re partners, we’d like to see the books, we’d like to get some payments.’ Their response was to try to evict us.”

NBDC took Sweeny to arbitration, and at the hearing “started asking very embarrassing questions,” says Peters. “And at lunchtime they settled with us, giving us 100 percent of what we thought we were entitled to. So he’s a typical schoolhouse boy—if you’re able to stand up to him, he’ll back down.” Sweeny left his GMDC job (but remains on the board) as the Voice was reporting this story and as the AG began his probe. He insists his move to the Greyston Foundation in Yonkers—another industrial nonprofit—has nothing to do with the scandals that dog him.

‘The World Trade Center was conceived by vested interests, promoted by pressure groups, brought into being by a handful of powerful men for reasons of monetary gain or personal pressure, and indirectly subsidized by the taxpayer’